The district energy project is once again in jeopardy.

The $20 million biomass thermal energy endeavor is a partnership between the state and the city. It's also now about 12 percent over budget.

Officials from the Vermont Department of Building and General Services met with the Montpelier City Council Thursday to ask the city for more than $560,000 to help cover the cost overruns.

On Friday, Mayor John Hollar said, "The state has asked that we pay this amount and we have declined."

On Thursday, Michael Obuchowski, Building and General Services commissioner, told the City Council that there are several contributing factors for the cost overruns.

He said that delays in formalizing the project, floodproofing the new building and construction challenges in meeting the October 1 deadline all played a role in the increased cost.

In 2011, Montpelier voters approved the district energy bond. At that time, the project schedule said construction would begin in 2012.

That didn't happen. Negotiating the contracts between the city and the state took several months longer than was planned. And then the new City Council and Mayor took over in March and didn't officially sign-off on the project until August 2012.

Now it's up to the State Legislature to cough up the extra dough.

Washington County Senator Ann Cummings said Thursday that Senator Dick Mazza, who is on the Senate Committee on Institutions, is not pleased about the overruns.

When the State Legislature authorized the original $7 million for the district energy project in 2011, Mazza wasn't jumping up and down to fund it then.

Now that the project is nearly 12.4 percent more costly, it's not a foregone conclusion that the State Legislature will pony up the $2.3 million.

The district energy power plant and distribution system are supposed to be fully operational on October 1.

City Manager William Fraser told the state on Thursday that the city's district energy customers are expecting service to begin no later than October 1.

Fraser said that the city has $3.7 million worth of commitments and $1 million has already been spent, and that funding for the project dependends on customer revenue beginning on October 1.